U.S. electric vehicle giant Tesla Inc. recently clashed with China's young e-commerce sensation Pinduoduo, that shot to fame by offering heavy discounts. The U.S. carmaker refused to deliver locally-made Model-3 sedans to customers who bought the cars on Pinduoduo, disputing the platform's price-slashing stunt.

The escalating tensions have sparked an intense debate on China's social media as both parties hold on to their own explanation of protecting the rights of customers.

It all started on July 21, when Pinduoduo announced an online promotion selling 50,000 Model 3 sedans via car retailer YiAuto at a subsidized price of 251,800 yuan, about 14 percent lower than the official price of 291,800 yuan. 

In response to the promotion, Tesla said in a Weibo post that the company never had any cooperation with Pinduoduo or YiAuto, nor did it sell any vehicles to them, cautioning: "If consumers have any disputes or damages to their rights due to the above group buying activities, our company will not bear any responsibility." 

The promotion, nevertheless, still went live on July 26. Orders were ultimately placed directly on Tesla's website, using customer's personal details.

On Thursday, Tesla refused to deliver the order to a customer from Wuhan, which triggered the dispute between Tesla and Pinduoduo.

Tesla said the company's reselling terms were breached upon finding out the order had gone through Pinduoduo.

The Wuhan customer was more than welcome to re-place his order via official channels should he wish, the carmaker said, adding that it is willing to "compensate for the customer's loss of time and effort spent on this."

Pinduoduo said it was "disappointed that Tesla has made it difficult for some fans to get their dream car."

"We appreciate the trust that our users put in our platform and will do everything we can do protect their rights," the company said. 

However, a customer from Shanghai, who placed an order in the same promotion, successfully got a car on Sunday, according to media reports.

The customer from Wuhan, whose order was cancelled by Tesla, threatened to file a legal suit against the company, requiring it to revert the cancellation and get back to the delivering process. 

Crux of the matter

Some netizens argued that Tesla's rejection to deliver was not understandable because it got paid the same as the official price, not losing anything. 

Michael Norris, research and strategy manager at e-commerce and marketing service provider AgencyChina, pointed out that the direct-sale model of Tesla and its pricing strategy are at the center of the conflict. 

Pinduoduo usually works with third-party distributors to subsidize the price of branded products, he told CGTN, and its subsidies have been effective in attracting new users to Pinduoduo and increasing purchase size, however, some brands, like Tesla, aren't pleased with the subsidies.

"The promotion Pinduoduo constructed with car dealership Yiauto threatens to dislocate Tesla's price strategy in China, by intimating that cheaper Teslas can be obtained by going through a third-party platform," Norris explained.

"Tesla's rejection of Pinduoduo is about protecting price governance and the integrity of Tesla's direct sales model," he added.

Pinduoduo, known for offering group buying deals with heavy subsidies, has surpassed e-commerce competitor JD.com and grown to become the second largest player in China in terms of market cap within just five years of its establishment, chasing the e-commerce conglomerate Alibaba Group, though the latter is still over six times its market cap.

Norris cautioned risks of Tesla denying delivery: "One of the things that's tricky about this case is Pinduoduo completing transactions on behalf of users using their personal information, and paying on their behalf. This detail will be critical in any legal dispute."

Tesla broke contract? 

Tesla might have violated article 49 of China's e-commerce law, which forbids e-commerce businesses to cancel a contract after a customer has made certain payments, said Qiu Baochang, legal consultant at the China Consumers' Association, in an interview with China National Radio.

The relationship between Pinduoduo and consumers is not a buyer-seller relationship, Qiu said, adding that "Pinduoduo is entrusted by consumers to pay for the car on their behalf," which is an entrusted payment relationship.

Qiu added if the original electronic contract did not stipulate that no other parties are allowed to pay on behalf of the customers, Tesla's unilateral cancellation of the order and claims that it did not entrust any external platform to sell cars as a reason to reject delivery breach that contract.

"Regardless of whether he (the Wuhan consumer) entrusts Pinduoduo or other parties to pay on his behalf ... it is a contract signed between the consumer and Tesla, not with Pinduoduo," he said.

No ending in sight?

It was reported earlier on Tuesday that the Wuhan customer had successfully received his sedan from Tesla with assistance from Pinduoduo and YiAuto. 

The news was later debunked by a Tesla staff. He said in a Weibo post that Tesla was in communication with the Wuhan customer between 9:15-9:30 p.m. but the news had gone viral online after 8:00 p.m., "Totally fake news!" Tesla China VP for External Affairs Tao Lin shared the post on her Weibo account.